Tuesday December 2, 2014 - 03:22:18 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 02-Dec-2014 -0322 GMT
Dow (17,776.80, -0.29%) failed to rally on good ISM number. We have first technical signs of caution of a much larger medium-term top. Though it is not confirmed and many such signals have also been blown-up in Central bank motivated liquidity driven rallies. However, the FED's policies are in crux of change, and caution is definitely warranted at new-highs and after a 5-year rally.
Nikkei (17,586.24, -0.02%) remains range bound after surprising but much needed debt rerating. This might force governments to go ahead with the sales tax much in line with BOJ's stimulus plan. For the day, we expect Nikkei to continue to consolidate above 17,500, before an eventual move up.
Shanghai (2,5687.12, +0.26%) continues its rise despite some bad numbers and concerns of banking losses. This indicates this is in a secular bull run phase and has long way to go before this is finished. For the long term investors Shanghai remains a good investment on corrections.
Dax (9963.51, -0.17%) continues to trade just shy of 10,000 mark, its crucial resistance. We expect an upside breakout, which has to be however confirmed by the market. 10,200 and 10,500 are the targets above the resistances.
Nifty (8,555.9, -0.38%) as expected was cautious before the RBI announcements. A note of caution, though much gain can be anticipated if RBI cuts the rates, however most the 'news' might have been factored in with its out performance. The news might turn into a sell-on-fact episode. It is good to be cautious at these levels.
Commodities are trading in the positive. Bounce in Crude oil has been as expected. Metals have also recovered the fall in the past few sessions.
Gold (1151.942) has bounced up sharply covering gains on movement of almost the past 22 sessions. If the rise sustains we may look towards our target of 1230 in a few sessions else need to see some sideways consolidation near 1200-1220 for some sessions.
Silver (16.37) has risen as expected, within an overall long term down trend. May expect the 18-15.8 region to hold for some more time.
Brent (72.23) has recovered the small movement seen yesterday but a strong signal of a reversal is yet to come. Bouncing from 67.53 there could be some positive movements coming up in the near term. Nymex WTI(68.62) if does not sustain the rise from here may see a drag to much lower levels of 60-58. But unless we see a rise towards 75-80 the negative side cannot be avoided.
Copper (2.9185) made an intra-day low of 2.799 yesterday from where it bounced up to close at 2.9305. It is trading near lowest levels compared to the last few years and while the longer term trend is down, we may see some bounce towards 2.95-3 in the near term.
Euro (1.2465) made another attempt at 1.25 on back of Swiss referendum and failed, to end the day effectively unchanged. 1.25 is morphing into a strong resistance zone. Price action confirms the downtrend and weakness in Euro. We expect 1.2250 to transpire in the month of Dec.
Pound-Dollar's (1.5725) took support at 1.56 for the third time reinforcing that 1.56 is a substantial support. It is now back in the range zone of 1.5600-1.5800.
Dollar-Yen (118.44) was rejected from 119 levels of news of Japan bond downgrades. The ripple effects of this could be seen in other markets also. Dollar-Yen is now a good sell with the stop above 119, for a target of 117 and 116. We expect this move over a period of few weeks.
Dollar-Rupee (62.02) market is keenly watching the RBI comments today. The levels of 62.20 has now held the price moves twice in past few days. For today, the immediate ranges are 61.90-62.20, and 62.30 on the higher side. We will let the markets play out today.
Aussie-Dollar (0.8481) bounced back to cover the falling gap it created on Monday morning. Though the trend is lower bears have be cautious until the support of 0.8430 is broken. Bears need a confirmation that the Monday-Tuesday's price action is not an bear exhaustion but a beginning of a down trend.
The US yields have risen after continued fall in the past few sessions. The 10Yr-5Yr yield differential (0.698%) has risen from 0.683% yesterday, flattening the curve further.
Apart from the German yields, the French, Italian and Greek yields are also falling. The 10Yr UK yields (1.91%) has fallen sharply on lower consumer confidence data. The 10Yr Italian yield (2.014%) has fallen sharply from 2.031% while the Greek 10Yr 7.928%) has dropped from 8.213%. This suggests that globally the yields are falling and may continue for sometime in the near term while Dollar may gain some strength over major currencies in the near term.
The Indian 10Yr GOI (8.0587%) has dropped sharply ahead of the RBI policy meet today. Markets expect a rate cut but there are few who believe this would happen. Not expecting a fall below 8% just now.
3:30 GMT or 9:00 IST RBA Meeting
...Expected 2.5 % ...Previous 2.5 %
5:30 GMT or 11:00 IST RBI Repo Rate
...Previous 8.0 %
5:30 GMT or 11:00 IST RBI Reverse Repo Rate
...Previous 7.0 %
5:30 GMT or 11:00 IST RBI CRR
...Previous 4.0 %
5:30 GMT or 11:00 IST RBI MSF
...Previous 9.0 %
...Previous 49.4 ...Actual 50.1
...Expected 50.50 ...Previous 50.80 ...Actual 50.3
...Expected 52.10 ...Previous 52.10 ...Actual 52.0
...Previous 51.6 ...Actual 53.3
...Expected 52.9 ...Previous 55.3 ...Actual 52.10
...Expected 50.40 ...Previous 50.60 ...Actual 50.10
...Expected 53.1 ...Previous 53.3 ...Actual 53.50
US Manufacturing ISM
...Expected 57.90 ...Previous 59.00 ...Actual 58.7
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